What to Do When a Supplier Fails to Deliver Goods

What can a Minnesota buyer do when a supplier fails to deliver?

When a supplier fails to deliver or repudiates, a Minnesota buyer may cancel “with respect to any goods involved, and with respect to the whole if the breach goes to the whole contract,” recover any price already paid, and either buy substitute goods or claim market-price damages. Minn. Stat. § 336.2-711(1) provides that “the buyer may cancel and with or without having done so may in addition to recovering so much of the price as has been paid” buy substitute goods (called “cover”) or recover damages for nondelivery.

Cancelling does not give up your damages claim. Under Minn. Stat. § 336.2-106(4), cancellation has the same effect as termination “except that the canceling party also retains any remedy for breach of the whole contract or any unperformed balance.”

Subsection (2) of section 336.2-711 adds remedies aimed at the goods themselves. Where the seller fails to deliver or repudiates, the buyer may also, “in a proper case obtain specific performance or replevy the goods as provided in this article (section 336.2-716).”

These are default rules for sales of goods. Article 2 “applies to transactions in goods” under Minn. Stat. § 336.2-102(1). For a deal mixing goods and services, subsection (2) provides that if the “sale-of-goods aspects predominate, this article applies to the transaction,” though other law can still reach the parts of the deal unrelated to the sale of goods. If they do not predominate, “only the provisions of this article which relate primarily to the sale-of-goods aspects of the transaction apply.” Section 336.2-102 was amended by Laws 2024, chapter 93, and for older deals Minn. Stat. § 336.0A-201 provides: “Except as provided in sections 336.0A-301 to 336.0A-306, a transaction validly entered into before August 1, 2024, and the rights, duties, and interests flowing from the transaction remain valid thereafter and may be terminated, completed, consummated, or enforced as required or permitted by law other than this chapter or, if applicable, this chapter, as though Laws 2024, chapter 93, had not taken effect.” For a contract that is not a sale of goods, the general rules on Minnesota breach of contract remedies are the starting point. Your purchase order, the supplier’s terms, or a signed supply agreement can also add to or limit these remedies, as the section on contract limits explains.

When does a missed or short shipment become a failure to deliver?

A supplier fails to deliver when it misses the delivery date the contract sets or, if the contract sets none, a reasonable time. Under Minn. Stat. § 336.2-309(1), “The time for shipment or delivery or any other action under a contract if not provided in this article or agreed upon shall be a reasonable time.”

A reasonable time can be the date the seller knew mattered. In Barbarossa & Sons, Inc. v. Iten Chevrolet, Inc., 265 N.W.2d 655 (Minn. 1978), a sewer contractor told every bidding dealer it needed a truck by April 1 for its construction season. Neither the winning bid nor the purchase order stated a delivery date, but the dealer’s salesman orally agreed to April 1. The Minnesota Supreme Court held that “the contract calling for delivery within a reasonable time required delivery by April 1, 1974,” so the dealer breached when it missed that date. I suggest writing the need-by date and the reason for it on the purchase order, because a written date leaves less to argue about.

Three other rules decide whether a shortfall is the supplier’s breach:

1. Partial shipments. Under Minn. Stat. § 336.2-307, “Unless otherwise agreed all goods called for by a contract for sale must be tendered in a single delivery and payment is due only on such tender.” A short shipment is not a complete delivery unless the contract or the circumstances allow delivery in lots. Where a short shipment is accepted, Minn. Stat. § 336.2-607 provides that “The buyer must pay at the contract rate for any goods accepted” (subsection (1)) and that “the buyer must within a reasonable time after the buyer discovers or should have discovered any breach notify the seller of breach or be barred from any remedy” (subsection (3)(a)).
2. Your own payment. Under Minn. Stat. § 336.2-511(1), “Unless otherwise agreed tender of payment is a condition to the seller’s duty to tender and complete any delivery.” If the contract required a deposit or prepayment, I suggest confirming it was made before treating the supplier as in breach, because an unpaid deposit may excuse the supplier’s wait.
3. An enforceable order. An order placed by phone or email still has to satisfy Minnesota’s statute of frauds for sales of goods, Minn. Stat. § 336.2-201, when the price is $500 or more, though subsection (3) makes a contract enforceable “with respect to goods for which payment has been made and accepted or which have been received and accepted (section 336.2-606).”

When the goods do arrive late and you keep them, a different set of rules applies: remedies for a late delivery you accept covers that situation.

How does a written demand for adequate assurance work?

When a supplier’s conduct gives you reasonable grounds to doubt it will deliver, you may demand adequate assurance in writing and, if commercially reasonable, suspend any performance for which you have not already received the agreed return until the assurance arrives. A supplier that does not give adequate assurance within a reasonable time after a justified demand has repudiated. Minn. Stat. § 336.2-609(1) provides: “When reasonable grounds for insecurity arise with respect to the performance of either party the other may in writing demand adequate assurance of due performance and until such assurance is received may if commercially reasonable suspend any performance for which the person making the demand has not already received the agreed return.”

Between merchants, both the grounds and the answer are judged by commercial standards. Subsection (2) provides: “Between merchants the reasonableness of grounds for insecurity and the adequacy of any assurance offered shall be determined according to commercial standards.”

A supplier that does not answer can be treated as having refused to perform. Under subsection (4), “After receipt of a justified demand failure to provide within a reasonable time not exceeding 30 days such assurance of due performance as is adequate under the circumstances of the particular case is a repudiation of the contract.” Check the current statute text before relying on that period.

The demand has to be in writing. In Teeman v. Jurek, 251 N.W.2d 698 (Minn. 1977), a farmer selling corn in installments stopped delivering over complaints about grading and scale weights. The Minnesota Supreme Court upheld the finding that he had no right to withhold delivery under section 336.2-609, because he had received assurance that his complaints would be remedied and “nothing can be found in the transcript of the evidence to indicate that Teeman ever in writing demanded adequate assurance of due performance from Jurek.” The party trying to withhold performance there was the seller, but the statute runs to “either party.”

A useful demand names the contract and the missed or threatened date, states the facts behind your concern, asks for specific assurance (a confirmed ship date, proof of inventory or a production slot), and sets a reply date. A copy with proof of delivery belongs in the file, because the statute requires the demand to be in writing.

A supplier that repudiates can still change its mind for a time. Under Minn. Stat. § 336.2-611(1), “Until the repudiating party’s next performance is due the repudiating party can retract the repudiation unless the aggrieved party has since the repudiation canceled or materially changed position or otherwise indicated that the aggrieved party considers the repudiation final.” I suggest telling the supplier in writing when you cancel or place a replacement order, because that notice ends its right to retract.

What counts as a repudiation, and when should you stop waiting?

When a supplier refuses a delivery that is not yet due, and losing it would substantially impair the contract’s value to you, Minnesota law lets you wait a commercially reasonable time or use your remedies at once. Under Minn. Stat. § 336.2-610, “When either party repudiates the contract with respect to a performance not yet due the loss of which will substantially impair the value of the contract to the other, the aggrieved party may” choose among the following:

• wait: “for a commercially reasonable time await performance by the repudiating party”
• act: resort to any remedy for breach, “even though the aggrieved party has notified the repudiating party that the aggrieved party would await the latter’s performance and has urged retraction”
• in either case, suspend your own performance.

A clear written refusal is the plainest case. In Teeman, the seller wrote to the buyer’s customer, with a copy to the buyer, that a later installment “will not be delivered either,” and then sold the corn on the open market. The buyer settled its own resale commitments and recovered the cost of those settlements, as the section on replacement goods explains.

A contract that “requires or authorizes the delivery of goods in separate lots to be separately accepted” is an installment contract under Minn. Stat. § 336.2-612(1), and it follows a separate rule. Under subsection (3), “Whenever nonconformity or default with respect to one or more installments substantially impairs the value of the whole contract there is a breach of the whole. But the aggrieved party reinstates the contract by accepting a nonconforming installment without seasonably notifying of cancellation or by bringing an action with respect only to past installments or by demanding performance as to future installments.” A buyer that wants out of the whole contract after a missed installment should say so promptly and in writing, because continuing to demand future deliveries can reinstate the contract.

Your own response to the shortfall can also become the breach. Minn. Stat. § 336.2-717 lets a buyer, on notice, deduct damages only “from any part of the price still due under the same contract,” so withholding payment on a different order carries real risk.

How do cover damages work when you buy replacement goods?

Cover means buying substitute goods from another source and charging the original supplier the extra cost, and after a breach covered by section 336.2-711, a Minnesota buyer may do it if it acts in good faith, without unreasonable delay, and reasonably. Minn. Stat. § 336.2-712(1) allows cover “by making in good faith and without unreasonable delay any reasonable purchase of or contract to purchase goods in substitution for those due from the seller.”

The damages formula is in subsection (2): “The buyer may recover from the seller as damages the difference between the cost of cover and the contract price together with any incidental or consequential damages as hereinafter defined (section 336.2-715), but less expenses saved in consequence of the seller’s breach.” The incidental damages under Minn. Stat. § 336.2-715(1) include “any commercially reasonable charges, expenses or commissions in connection with effecting cover and any other reasonable expense incident to the delay or other breach.”

Two Minnesota Supreme Court decisions show how courts apply it:

1. In Teeman, the court stated that “The test of proper cover is whether at the time and place of covering the buyer acted in good faith and in a reasonable manner.” The buyer’s settlements with its own customer were not, strictly, a cover purchase, but the court held that they represented the difference between the cost of cover and the contract price and were reasonable.
2. In Barbarossa, the contractor bought a similar truck from another dealer in September, and the court affirmed $1,010 in cover damages for the higher net price. The contractor also lost $4,950 in trade-in value, but the court deducted the $4,000 of depreciation it had saved by not owning the ordered truck all summer, leaving $950.

Cover is optional. Under subsection (3), “Failure of the buyer to effect cover within this section does not bar the buyer from any other remedy.” I suggest keeping the competing quotes, the specifications, and the dates of each replacement purchase, because reasonableness is judged at the time and place you covered.

How are damages measured if you do not buy replacements?

A buyer that does not cover may recover the difference between the market price when it learned of the breach and the contract price, plus incidental and consequential damages, less expenses saved. Under Minn. Stat. § 336.2-713(1), “the measure of damages for nondelivery or repudiation by the seller is the difference between the market price at the time when the buyer learned of the breach and the contract price together with any incidental and consequential damages provided in this article (section 336.2-715), but less expenses saved in consequence of the seller’s breach.” Subsection (2) fixes the location: “Market price is to be determined as of the place for tender”.

The Minnesota Court of Appeals has limited this measure for a buyer that bought to resell. In NHF Hog Marketing, Inc. v. Pork-Martin, LLP, 811 N.W.2d 116 (Minn. Ct. App. 2012), a hog producer stopped delivering when market prices rose and sold to another buyer. The buyer, a marketer paid a commission on hogs it delivered to a packer, sought $439,844.95, nearly all of it the market difference its packer customer would have borne. The packer had not sued, and the buyer offered no evidence that the packer was likely to insist on performance.

The court affirmed an award of $43,197.50, the buyer’s lost commission. It held that damages under section 336.2-713 “are limited to the buyer’s actual damages when the breaching seller shows that the buyer’s expected resale profit was less than market-differential damages and the buyer fails to show a likelihood that the resale purchaser will enforce the resale contract.” A buyer that resells should gather proof that its own customer is holding it to the resale contract.

When can you recover lost profits and other consequential losses?

Consequential losses, such as lost profits or downtime, are recoverable only if the seller had reason to know of your needs when the contract was made and the loss could not reasonably have been prevented by cover or otherwise. Minn. Stat. § 336.2-715(2) includes “any loss resulting from general or particular requirements and needs of which the seller at the time of contracting had reason to know and which could not reasonably be prevented by cover or otherwise”.

Barbarossa shows both the reason-to-know rule and the proof it takes. The court held that the dealer “was informed of Barbarossa’s need to replace its old truck before the 1974 construction season and therefore had reason to know that its delay in delivering the truck could be expected to result in Barbarossa’s incurring such additional expenses.” It also held that the contractor did not waive those damages by failing to cancel after the dealer announced the delay.

The proof still had to support each dollar. The trial court awarded $1,440 for lost working time at $30 an hour, but the record contained no evidence for that rate. The Supreme Court reduced the award to $128, measured by the fair rental value of a replacement truck. Its reason: “A buyer who seeks damages for breach of contract has the burden of proving the extent of his damages.” I suggest telling a supplier in writing, when you order, what the goods are for and what a delay would cost, because section 336.2-715(2) asks what the seller had reason to know at the time of contracting.

Your contract can narrow these remedies. Under Minn. Stat. § 336.2-719:

• Exclusive remedies. Under subsection (1), “resort to a remedy as provided is optional unless the remedy is expressly agreed to be exclusive, in which case it is the sole remedy.”
• Failed remedies. Under subsection (2), “Where circumstances cause an exclusive or limited remedy to fail of its essential purpose, remedy may be had as provided in this chapter.”
• Consequential-damages exclusions. Under subsection (3), “Consequential damages may be limited or excluded unless the limitation or exclusion is unconscionable. Limitation of consequential damages for injury to the person in the case of consumer goods is prima facie unconscionable but limitation of damages where the loss is commercial is not.”

A fixed late-delivery or nondelivery charge is tested under Minn. Stat. § 336.2-718(1): damages “may be liquidated in the agreement but only at an amount which is reasonable in the light of the anticipated or actual harm caused by the breach, the difficulties of proof of loss, and the inconvenience or nonfeasibility of otherwise obtaining an adequate remedy,” and “A term fixing unreasonably large liquidated damages is void as a penalty.” The broader rules on limitation of liability clauses and on liquidated damages or an unenforceable penalty apply from there. A cap printed only on the supplier’s acknowledgment may never have become part of the deal, which turns on whose terms govern when the forms conflict.

When does a supplier’s own supply problem excuse nondelivery?

A supplier is excused if an event the contract assumed would not happen, or good-faith compliance with a governmental regulation or order, made performance impracticable, the supplier did not take on that risk, and it gave the buyer seasonable notice. Minn. Stat. § 336.2-615(a) provides that “Delay in delivery or nondelivery in whole or in part by a seller who complies with paragraphs (b) and (c) is not a breach of duty under a contract for sale if performance as agreed has been made impracticable by the occurrence of a contingency the nonoccurrence of which was a basic assumption on which the contract was made or by compliance in good faith with any applicable foreign or domestic governmental regulation or order whether or not it later proves to be invalid.” The section opens with “Except so far as a seller may have assumed a greater obligation”.

Barbarossa read the statute as setting four requirements: “(1) a contingency has occurred which has made performance impracticable; (2) the nonoccurrence of that contingency was a basic assumption on which the contract was made; (3) the seller has not assumed a greater obligation; and (4) the seller has seasonably notified the buyer that there will be a delay or nondelivery.” The manufacturer canceled the dealer’s order, but the contract did not name the manufacturer as the source and had no escape clause. The court held that “A partial failure of a seller’s source of supply generally has been treated as a foreseeable contingency, the risk of which is allocated to the seller absent a specific provision to the contrary in the contract,” and added: “Iten could have conditioned its offer on its ability to obtain the truck from General Motors.”

Naming the source changed the result in Selland Pontiac-GMC, Inc. v. King, 384 N.W.2d 490 (Minn. Ct. App. 1986). The written agreement said the school bus bodies would be manufactured by a named Manitoba plant, which went into receivership and never built them. The Court of Appeals affirmed that the seller was excused: “Supply of Superior bus bodies was a basic assumption on which the contract was made,” and, distinguishing Barbarossa, “Here the seller’s supplier was specified in the contract.”

Notice and fair allocation are part of the excuse:

• Notice. Under paragraph (c), “The seller must notify the buyer seasonably that there will be delay or nondelivery”. Selland cautioned that “notice of delay does not necessarily constitute notice of nondelivery,” though the seller there met the requirement by passing on information as it learned it.
• Allocation. Under paragraph (b), “Where the causes mentioned in paragraph (a) affect only a part of the seller’s capacity to perform, the seller must allocate production and deliveries among the seller’s customers”. The seller must also tell the buyer its estimated quota.

A buyer that receives “notification of a material or indefinite delay or an allocation justified under the preceding section” has a choice under Minn. Stat. § 336.2-616(1). By written notification “as to any delivery concerned,” and as to the whole contract only “where the prospective deficiency substantially impairs the value of the whole contract under the provisions of this article relating to breach of installment contracts (section 336.2-612),” it may “terminate and thereby discharge any unexecuted portion of the contract,” or it may “modify the contract by agreeing to take the available quota in substitution.” Waiting has a consequence: under subsection (2), “If after receipt of such notification from the seller the buyer fails so to modify the contract within a reasonable time not exceeding 30 days the contract lapses with respect to any deliveries affected.” Check the current statute text before relying on that period.

A supply contract may also carry a force majeure clause that names excusing events and notice steps. Barbarossa explained that the UCC excuse provision “has replaced the common-law requirement of impossibility of performance by a less stringent standard of commercial impracticability,” a doctrine with its own page on commercial impracticability. For a seller, Barbarossa and Selland point to the same drafting step: name the source of supply and say what happens if it fails.

When can a buyer force the supplier to hand over the goods?

A court may order the supplier to deliver when the goods are unique or in other proper circumstances, and a buyer may recover identified goods by replevin when it cannot cover after reasonable effort. Under Minn. Stat. § 336.2-716(1), “Specific performance may be decreed where the goods are unique or in other proper circumstances.” Subsection (2) lets the court attach terms on payment of the price, damages, or other relief it deems just.

Replevin reaches goods already identified to your contract. Under subsection (3), “The buyer has a right of replevin for goods identified to the contract if after reasonable effort the buyer is unable to effect cover for such goods or the circumstances reasonably indicate that such effort will be unavailing”. A buyer considering either remedy should keep a record of each attempt to find replacement goods, because the replevin right depends on showing that cover was unavailable after reasonable effort.

What should a buyer document and send after a missed delivery?

A buyer protects its claim by keeping the contract record, putting each decision in writing, and sending a written notice of claim. The written record answers the questions a claim turns on: the agreed or reasonable date, the supplier’s statements, the buyer’s assurance demand, the date the buyer learned of the breach, and what the replacement goods cost. A practical file holds:

1. The purchase order, the supplier’s quote or acknowledgment, any signed supply agreement, and the emails that set or changed the delivery date.
2. Each written demand for assurance, the supplier’s replies, and any notice of cancellation or of a cover purchase.
3. Market-price evidence for the date you learned of the breach, and the quotes, invoices, and freight bills for replacement goods.
4. Proof of each consequential loss, with the documents showing what the supplier knew about your needs when you ordered.

A written notice of claim can also start interest. Under Minn. Stat. § 549.09, subd. 1(b), “Except as otherwise provided by contract or allowed by law, preverdict, preaward, or prereport interest on pecuniary damages shall be computed as provided in paragraph (c) from the time of the commencement of the action or a demand for arbitration, or the time of a written notice of claim, whichever occurs first, except as provided herein.” The subdivision sets further conditions, including how settlement offers affect interest, that “The action must be commenced within two years of a written notice of claim for interest to begin to accrue from the time of the notice of claim,” and that preverdict interest is not awarded on “judgments or awards not in excess of the amount specified in section 491A.01”. Check the current statute text before relying on that period. A pre-litigation demand letter that states the claim and the amount can serve as that notice.

The limitations clock starts at the breach. Under Minn. Stat. § 336.2-725(2), “A cause of action accrues when the breach occurs, regardless of the aggrieved party’s lack of knowledge of the breach.” Minnesota’s version adds that “The limitations in this section do not apply to actions for the breach of any contract for sale of a grain storage structure or other goods that are incorporated into an improvement to real property, except equipment and machinery,” which fall under Minn. Stat. § 541.051. The original contract may shorten the period but not extend it, so check the supplier’s terms along with Minnesota limitations periods for business claims.

Where a Minnesota Buyer Stands After a Missed Delivery

A Minnesota buyer whose supplier fails to deliver may cancel as to the goods involved, recover what it paid, and then either buy replacements and charge the price difference or claim the market difference, with incidental and consequential damages the record supports. The claim is strongest when the delivery date and the purpose of the goods are in writing, the assurance demand and the cancellation are in writing, and the replacement purchase is prompt and reasonable. A supplier’s own supply failure can excuse it where performance as agreed “has been made impracticable by the occurrence of a contingency the nonoccurrence of which was a basic assumption on which the contract was made or by compliance in good faith with any applicable foreign or domestic governmental regulation or order,” the supplier did not take on that risk, and it gave seasonable notice. Contract terms can narrow any of these remedies, so the purchase order and the supplier’s paperwork should be read alongside the statute. Supply disputes are one part of Minnesota business contract law. If a supplier has not delivered and you want to know which remedy fits your documents and what the claim is likely worth, email me at [email protected] with a brief description and the purchase order.